Dear friends and clients:
Resolution No. 08-2024 of the National Court of Justice of Ecuador establishes a binding legal precedent regarding the imposition of fines in administrative contracts.
The National Court of Justice must develop jurisprudential precedents based on triple reiteration decisions, in accordance with the provisions of our Constitution (Art. 184.2 and 185) and the Organic Code of the Judicial Function (Art. 180.2 and 182).
This process consists of the deliberation and ratification of these judgments by the Panel of the Court, which makes them a binding jurisprudential precedent.
2. Fines for delay or non-performance of public contract obligations
The Organic Law of the National Public Procurement System (LOSNCP), in its article 71, establishes that public contracts must include penalty clauses for delay or non-compliance with obligations.
It should be noted that these penalties are not a strict administrative sanction, but a coercive power to ensure the correct execution of the contract.
3. Repeated cases: Relevance and purpose of fines
In three judgments, the Administrative Chamber of the National Court stated that fines must be imposed in a timely manner in order to serve the purpose of correcting the contractor's non-compliance.
Therefore, the imposition of fines during or after the unilateral termination of the contract is considered illegal. This criterion is stated in the following 3 judgments:
No. 01803-2018-00076
No. 01803-2018-00402
17811-2018-01410
4. The decision of the Panel of the Court
Based on the foregoing, the Panel of the Court has ruled that fines must be imposed in a timely manner and that their late imposition or imposition at the same time as the termination of the contract renders them unlawful.
This decision has general and binding effects, even for the National Court itself.
The General Secretariat of the National Court of Justice must send certified copies of the decision for its publication in the Official Gazette and its systematization.
5. Effects and Obligations
This resolution affects the manner in which public entities in Ecuador must impose contractual penalties and emphasizes the need for timely enforcement in order for these penalties to be legal and effective.
Do you need legal advice to protect your rights in case of fines in public contracts?
At Meythaler & Zambrano Abogados, we understand the complexity of the current legislation regarding public contracts. We are here to help you better understand these regulations. If you need advice and guidance on this matter, please do not hesitate to contact us.